Free Trade Agreements: Basic Principle

The basic principle when considering employing preferential origin to confirm a lower or zero duty rate on import, is to ensure that the trade agreement you are applying is understood for the compliance requirement, and that the compliance requirements are met.

Each agreement is different, and the EU UK Trade Cooperation Agreement is unlike any Free Trade Agreement the UK has with any other country. The TCA does not replace the pre-EU Exit free movement of goods, but instead offers movement within a strict protocol based on Preferential Origin.

Legal requirements

It is a legal requirement that UK exporters must evidence that their goods meet the Product Specific Rule within the TCA by collating supplier declarations from within the supply chain for those goods, before the UK manufactured product is exported. This origin compliance data must be filed for audit

The EU UK Trade Cooperation Agreement – At Export

A UK exporter wishing to confirm to an EU recipient customer that supplied goods are UK origin, it will be necessary to have records in place to evidence how you arrived at that preferential origin conclusion before you make the preference statement.  This is a legal requirement. 

Without this supporting evidence your business will not be compliant with UK regulations, or with the EU UK TCA.

Supplier Declarations: Evidence from the supply chain

Supplier declarations are documents that a supplier provides to an exporter to help establish whether the goods for export meet the Product Specific Rules of origin.

Example: If a UK manufactured product does not meet the PSR in the TCA on its own origin merit, then evidence could be gathered from within the supply chain that could confirm that the percentage of UK origin goods has been met.             

Supply Chain Evidence and the UK EU Easement for Supplier Declarations to support an Export

There has been an easement in place for both UK and EU exporters, to allow time to gather the supplier information to support the use of a preference statement to be made at export of the UK manufactured goods.

This easement was for both UK and EU member state businesses and was based on the premise that UK and EU businesses would need time to build product origin records to support the declaration of Preference Origin applicability. Preference Origin is main stay of the EU UK Trade Cooperation Agreement.

This easement is restricted in what it was intended to do. It does not apply to a UK importer claiming a preferential duty at IMPORT. The importer must have the origin compliance evidence in place at the time of import.

The EU UK Trade Cooperation Agreement – At Import

The salient point to note is that when IMPORTING to preference, it is a legal requirement to have the compliance evidence in place BEFORE making the import declaration. There has been no easement either in the UK or the EU for making IMPORT declarations to a preference duty rate.

Without the supporting evidence of preference origin, an exporter CANNOT issue an exporter preference origin statement on the export paperwork, and the EU importer relying on that information to evidence preference on import into an EU member state, will not be compliant.

Importers Burden to evidence preference compliance at import – Compliance Considerations:

• Without evidence of preference origin in place at import, the importer is non-compliant.
• An exporting business must hold supplier origin declarations to support any exports that have made in 2021
• If your business has been asked to verify goods origin for any exports made to the EU between 1^st January, 2021 and December 31^st 2021 and your business cannot provide  either a supplier declaration or other suitable evidence to confirm goods origin, you must let your customer know
• If an exporter is asked to verify the preference origin of goods and cannot provide this supporting evidence:
• The importer will be liable to pay the full, non-preferential customs duty
• The importer may be charged a penalty, and
• The exporter may be excluded from using preferential tariffs going forward.

While you are here you may be interested in some Strong & Herd LLP training courses related to this topic:

Understanding Origin & Preference

Understanding Free Trade Agreements

The Export Course – 2 days